Control in Strategic Management Process : Step 4/4 Str. Mgt. Process/Framework -II

The difference between Operational and Strategic Control processes.

In contrast to the large amount of data and extended time frame required for strategic controls to take effect, operational controls monitor and evaluate day-to-day functions to correct any problems as soon as possible. Operational controls may be either manual or automated, and can involve people, processes, and technology. When successful, they flag potential risks, identify misalignments between plans and actions, and effectively implement changes to stay on course with your strategy.

For example, if there are technical malfunctions or performance is below expectations, operational control processes can initiate a course correction quickly. This could include updating an IT system or retraining particular employees, respectively. Or, imagine a factory that produces widgets. If the number of widgets drops below expectations or the error rate rises above expectations, a process control alert should be triggered to make the proper operational change.

Strategic control, on the other hand, might then evaluate whether the hiring criteria and employee onboarding processes need adjustment in order to achieve your strategy.

Strategic Control Techniques

There are four primary types of strategic control:

Premise Control

Every organization creates a strategy based on certain assumptions, or premises. As such, premise control is designed to continually and systematically verify whether those assumptions, which are foundational to your strategy, are still true. These are typically environmental (e.g. economic or political shifts) or industry-specific (e.g. new competitors) variables.

The sooner you discover a false premise, the sooner you can adjust the aspects of your strategy that it affects. In reality, you can’t review every single strategic premise, so focus on those most likely to change or have a major impact on your strategy.

Implementation Control

This type of control is a step-by-step assessment of implementation activities. It focuses on the incremental actions and phases of strategic implementation, and monitors events and results as they unfold. Is each action or project happening as planned? Are the proper resources and funds being allocated for each step? This process continually questions the basic direction of your strategy to ensure it’s the right one.

There are two subcategories of implementation control:

·         Monitoring Strategic Thrusts Or Projects

This is the assessment of specific projects or thrusts that have been created to drive the larger strategy. This early feedback will help you decide whether to continue onward with the strategy as is or pause to make adjustments.

You can pre-determine which thrusts are critical to the achievement of your goals and continually assess them. Or, you can decide which measurements are most meaningful for your thrusts or projects (such as timeframes, costs, etc.) and use that data as an indicator of whether a thrust is on track or not, and how that may subsequently affect the strategy.

·         Reviewing Milestones

During strategic planning, you likely identified important points in the implementation process. When these milestones are reached, your organization will reassess the strategy and its relevance. Milestones could be based on timeframes, such as the end of a quarter, or on significant actions, such as large budget or resource allocations.

Implementation control can also take place via operational control systems, like budgets, schedules, and key performance indicators.

Special Alert Control

When something unexpected happens, a special alert control is mobilized. This is a reactive process, designed to execute a fast and thorough strategy assessment in the wake of an extreme event that impacts an organization. The event could be anything from a natural disaster or product recall to a competitor acquisition. In some cases, a special alert control calls for the formation of a crisis team—usually comprising members of the strategic planning and leadership teams—and in others, it merely means activating a predetermined contingency plan.

Strategic Surveillance Control

Strategic surveillance is a broader information scan. Its purpose is to identify overlooked factors both inside and outside the company that might impact your strategy. This process ideally covers any “ground” that might be missed by the more focused tactics of premise and implementation control. Your surveillance could encompass industry publications, online or social mentions, industry trends, conference activities, etc.

This graph clearly depicts the application of the four techniques for strategic control and how they function alongside each other:

Six Steps Of The Strategic Control Process

Whether your organization is using one or all four of the previous techniques of strategic evaluation and control, each involves six steps:

1.      Determine what to control.

What are the organization’s goals? What elements directly relate to your mission and vision? It’s difficult, but you must prioritize what to control because you cannot monitor and assess every minute factor that might impact your strategy.

2.      Set standards.

What will you compare performance against? How can managers evaluate past, present, and future actions? Setting control standards—which can be quantitative or qualitative—helps determine how you will measure your goals and evaluate progress.

3.      Measure performance.

Once standards are set, the next step is to measure your performance. Measurement can then be addressed in monthly or quarterly review meetings. What is actually happening? Are the standards being met?

4.      Compare performance.

When compared to the standards or targets, how do the actuals measure up? Competitive benchmarking can help you determine if any gaps between targets and actuals are normal for the industry, or are signs of an internal problem.

5.      Analyze deviations.

Why was performance below standards? In this step, you’ll focus on uncovering what caused the deviations. Did you set the right standards? Was there an internal issue, such as a resource shortage, that could be controlled in the future? Or an external, uncontrollable factor, like an economic collapse?

6.      Decide if corrective action is needed.

Once you’ve determined why performance deviated from standards, you’ll decide what to do about it. What actions will correct performance? Do goals need to be adjusted? Or are there internal shifts you can make to bring performance up to par? Depending on the cause of each deviation, you’ll either decide to take action to correct performance, revise the standard, or take no action.

The diagram above shows how each control system is different from one another. Effective control systems have certain characteristics. For a control system to be effective, it must be:

1. Accurate. Information on performance must be accurate. Evaluating the accuracy of the information they receive is one of the most important control tasks that managers face.
2. Timely. Information must be collected, routed, and evaluated quickly if action is to be taken in time to produce improvements.
3. Objective and Comprehensible. The information in a control system should be understandable and be seen as objective by the individuals who use it. A difficult-to understand control system will cause unnecessary mistakes and confusion or frustration among employees.
4. Focused on Strategic Control Points. The control system should be focused on those areas where deviations from the standards are most likely to take place or where deviations would lead to the greatest harm.
5. Economically Realistic. The cost of implementing a control system should be less than, or at most equal to, the benefits derived from the control system.
6. Organizational Realistic. The control system has to be compatible with organizational realities and all standards for performance must be realistic.
7. Coordinated with the Organization's Work Flow. Control information needs to be coordinated with the flow of work through the organization for two reasons: (1) each step in the work process may affect the success or failure of the entire operation, (2) the control information must get to all the people who need to receive it.
8. Flexible. Controls must have flexibility built into them so that the organizations can react quickly to overcome adverse changes or to take advantage of new opportunities.
9. Prescriptive and Operational. Control systems ought to indicate, upon the detection of the deviation from standards, what corrective action should be taken.
10. Accepted by Organization Members. For a control system to be accepted by organization members, the controls must be related to meaningful and accepted goals.

These characteristics can be applied to controls at all levels of the organization. What is controlled at what levels in strategy implementation is given in the following diagram.

 Normally the tools used include  a balanced score card for effectiveness in control activity.

Those who read this, also read

1. Control in Strategic Management Process : Step 4/4 Str. Mgt. Process/Framework -I